Venezuela eases price controls on food

[Bacchus39]

Venezuelans were way out in front of the government on this one.


http://www.newsvine.com/_news/2008/08/12/1743298-venezuela-eases-price-controls-on-food

Tue Aug 12, 2008 7:19 PM EDTbusiness, food, venezuela, pricesFabiola Sanchez, Associated Press WriterCARACAS — Venezuela relaxed price controls on 15 foods ranging from bread to beef and removed controls from other products Tuesday in a bid to ease sporadic shortages in supermarkets.

The move, which increased controlled prices from 20 to 50 percent, generated fears of an upward tick in already high inflation in Venezuela, whose government is trying to move the South American nation toward socialism.

Eduardo Saman, president of the state-run Institute for the Defense of People's Access to Goods and Services, said the price adjustments would have a minimal effect on inflation. He argued it may even help keep prices down by encouraging vendors to heed price controls instead of selling goods "at whatever price."

"The measures seem very rational to me," Saman told The Associated Press.

Foods in high demand, such as prime cuts of beef, went up 50 percent to US$8 per kilogram (US$3.60 a pound), while pasta went up 23 percent to US$1.57 per kilogram (71 cents a pound). Wheat-bread prices increased 49 percent, reaching US$2.06 per kilogram (94 cents a pound).

The government removed price controls for items including oatmeal, salt, and special pork cuts, while relaxing controls on bread, beef, pork and pasta. The measures went into effect on Tuesday.

The move came in response to shortages of various foods in Venezuela.

The Central Bank said last week that in July, 12 percent of the products that make up the basic food basket — which is used to measure inflation — had experienced shortages.

Annual inflation in metropolitan Caracas reached 33.7 percent in July.

When the government adjusted prices on some basic food products earlier this year, the move had a strong impact on inflation in May — a 3.2 percent increase — but helped slow inflation in June and July as supply increased.

The institute will begin inspecting businesses on Wednesday to make sure they are complying with the price adjustments, Saman said.

Alberto Cudemus, president of the Venezuelan Pork Federation, applauded the price adjustments, which he called "difficult" and "very important."

Cudemus told Venezuela's Union Radio that the new prices for pork will guarantee that production and supply will be profitable.

But Tomas Ramos, president of the Venezuelan Bread Industry Federation, said that bread still cannot be produced profitably even at the new prices. He added, though, that bakers hoped to keep the market supplied.